The House Ways and Means committee recently reported on tax legislation designed to incentivize reconstruction in hurricane-ravaged areas of the Gulf region. These incentives include: 50% bonus depreciation; doubling the expensing of property allowable to small businesses under section 179, and allowing a 5 year carryback of NOLs. Perhaps most important is the allowance for businesses to expense up to 50 percent of the cleanup and demolition costs incurred.
These cleanup costs would otherwise have to be capitalized under current rules. To illustrate, suppose you bought a property with a broken-down business on it. You want to build a new one. The demolition costs become part of the basis in the land you have acquired. That means no tax benefits for you. This change should help reduce the after-tax cost of the cleanup and construction of new business structures in the region.
Not all businesses will be treated equally, however. The Committee Report states: “The GO Zone restoration tax incentives will not be extended to the following types of businesses or investments: Country clubs, facilities used for gambling, hot tub facilities, liquor stores, massage parlors, private or commercial golf courses, racetracks, and suntan facilities. “ Looks like these groups had lobbyists that let them down. (Or perhaps the politicians took their money and decided to vote against them anyway.) So, it looks like a lot of folks in the Gulf region are going to have quiet, dry, and (with no suntan facilities incentives) a pasty white Christmas.
P.S. This bill also includes a one-year extender for AMT relief. Mr. Rangel must be pleased.